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Home >> Business
UPDATED: 14:04, September 08, 2005
Central America to seek cheap oil in Venezuela amid rising world fuel prices
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Central American countries, worried about the impact of high oil prices on their economic growth after Hurricane Katrina, recently said they will pay a visit to Venezuela to seek cheap crude from the world's fifth largest oil producer.

The economic difficulties of Central American countries, most of which have to rely on imports for industrial demand, were exacerbated as refiners and pipelines in the Gulf of Mexico were crippled by Hurricane Katrina.

Katrina, which ripped through the southeastern part of the United States, shut nearly all of the Gulf of Mexico's oil production and 88 percent of natural gas output there, and closed down nine refineries along the coast.

After the hurricane, oil prices skyrocketed to unprecedented levels in the international market, representing an enormous burden and stunting the development of regional economies in Central America.

"The consequences of the world oil crisis we are faced with are pretty much like that of an earthquake or a tsunami," said El Salvador President Antonio Saca at the end of a regional meeting held in Nicaragua.

Costa Rican President Abel Pacheco also described the recent rise of international oil prices as a "blow to developing countries and mostly to poor ones."

On Tuesday, PetroCaribe, a regional initiative launched by Venezuela to minimize the effects of an economic crisis brought on by high oil prices, received final approval from Caribbean leaders.

In Montego Bay, Jamaica, Venezuelan President Hugo Chavez and the leaders of nine Caribbean nations signed accords that set out the details of the PetroCaribe initiative, which could help some of the more fragile economies in the region survive the shock of higher fuel prices.

Those signing the accords included the Dominican Republic, which has already proposed a series of national measures aimed at curbing fuel consumption, along with smaller countries such as Antigua, Suriname and St. Kitts and Nevis.

Cuba and Jamaica had previously signed onto the plan.

Under the plan, Caribbean governments would pay market price for Venezuelan oil, but they would only be required to pay a portion of the cost up front and could finance the rest over 25 years at 1 percent interest, Jamaican Prime Minister P.J. Patterson told the gathering.

Governments could also pay for part of the cost with services or goods such as rice, bananas or sugar while oil-rich Venezuela would provide assistance in expanding shipping and refining facilities.

Venezuelan Oil Minister Rafael Ramirez said the PetroCaribe initiative may also be extended to any interested Central American nations.

Therefore, the ministers of economy and energy of Central American countries will go to Venezuela this month in search of oil at low, preferential prices.

"The reason we're heading for Venezuela is that we have a good probability (of receiving subsidized oil) as a bloc," said El Salvador's Economy Minister Yoland Mayora.

"In the face of the current (energy) crisis, I see we have to act as a united force and, although it will be difficult to find a solution in Venezuela, we'll do our best," he added.

Mayora also said Central American countries want to act as a bloc to attain low oil prices under the Pact of San Jose, another energy cooperation agreement which Mexico and Venezuela inked with Central American and Caribbean nations in 1980.

As part of the agreement, Venezuela and Mexico supply 160,000 barrels of oil a day to the countries.

During the upcoming visit to Venezuela, the Central American ministers will call for a revision of the Pact of San Jose for more favorable oil prices to ease the pressure of fuel supply in the region.

The Pact of San Jose, sponsored by Mexico and Venezuela, allows for the supply of crude on credit to the Central American and Caribbean countries, but does not include preferential pricing.

Source: Xinhua

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